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Exam 32: The Balance of Payments, Exchange Rates, and Trade Deficits

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Question 71

Multiple Choice

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Which of the following represents the most contractionary fiscal policy?

A) A $30 billion tax cut.
B) A $30 billion increase in government spending.
C) A $30 billion tax increase.
D) A $30 billion decrease in government spending.

E) All of the above
F) B) and D)

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Question 72

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The operational lag of fiscal policy refers to the time that elapses between the beginning of a recession or inflation and the certain awareness that it is actually happening.

A) True
B) False

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Question 73

Multiple Choice

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The crowding-out effect of expansionary fiscal policy suggests that:

The largest proportion of the U.S.public debt is held by:

Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP.The government is engaging in a(n) :

The federal budget deficit is found by:

Suppose the price level is fixed,the MPC is .5,and the GDP gap is a negative $80 billion.To achieve full-employment output (exactly) ,government should:

Answer the question on the basis of the following before-tax consumption schedule for a closed economy: $\begin{array}{l}\text { Gross Domestic }\\\underline{\text { Product (GDP) } } & \underline{\text { Consumption (C) }} \\\$0 & \$ 40 \\100 & 120 \\200 & 200 \\300 & 280 \\400 & 360\end{array}$ Refer to the data.If a lump-sum tax (the same tax amount at each level of GDP) of $40 is imposed in this economy,the tax system:

Which of the following represents the most expansionary fiscal policy?

(Advanced analysis) Answer the question on the basis of the following before-tax consumption schedule for an economy: $\begin{array}{l}\text { Gross Domestic }\\\begin{array} { c c } \underline{\text { Product (GDP) } } & \underline{\text { Consumption (C) } } \\ \$ 100 & \$ 140 \\200 & 200 \\300 & 260 \\400 & 320 \\500 & 380\end{array}\end{array}$ Refer to the data.The 10 percent proportional tax on income would cause:

A specific reduction in government spending will dampen demand-pull inflation by a greater amount the:

If the economy has a cyclically adjusted budget surplus,this means that:

Which one of the following might offset a crowding-out effect of financing a large public debt?

An appropriate fiscal policy for severe demand-pull inflation is:

If Congress adjusted the U.S.tax system so that the MPC was reduced,the:

(Advanced analysis) Answer the question on the basis of the following before-tax consumption schedule for an economy: $\begin{array}{l}\text { Gross Domestic }\\\begin{array} { c c } \underline{\text { Product (GDP) } } & \underline{\text { Consumption (C) } } \\ \$ 100 & \$ 140 \\200 & 200 \\300 & 260 \\400 & 320 \\500 & 380\end{array}\end{array}$ Refer to the data.A 10 percent proportional tax on income would:

The average tax rate required to service the public debt is roughly measured by:

To say that "the U.S.public debt is mostly held internally" is to say that: